Simpson Manufacturing Company, Inc.

Greetings and welcome to Simpson Manufacturing's first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Kim Orlando with Adam Investor Relations. Thank you. You may begin.

Good afternoon, ladies and gentlemen. And welcome to Simpson Manufacturing Company's first quarter 2020 earnings conference call. On this call, the company may discuss forward-looking statements, such as future plans and events. Forward-looking statements, like any prediction of future events, involve risks, uncertainties, and assumptions that could cause actual results to differ materially from these statements. Some of these factors and cautionary statements are discussed in the company's public filings and reports, which are available on the SEC's or the company's corporate website. Please note that the company's earnings press release, which was issued today at approximately 4.15 Eastern Time. The earnings press release is available on the investor relations page of the company's website at www.SimpsonMFG.com. Today's call is being webcast, and a replay will also be available on the investor relations page of the company's website. Now I would like to turn the conference over to Karen Colonius, Simpson's President and Chief Executive Officer.

Thanks, Kim, and good afternoon, everyone. I'm pleased to discuss our results with you today. I'd like to first begin with a high-level summary of our first quarter financial performance and we'll then turn to a more detailed discussion on the coronavirus pandemic, the impact it has had on our business and the actions we are taking to address this unprecedented situation. We delivered a solid first quarter, both operationally and financially. Sales of $283.7 million increased 9.4% over the first quarter of 2019 and were driven by higher sales volumes in North America. Those volumes increased primarily due to milder weather conditions in our key markets compared to a year ago, which was an unusually cold and wet winter. Bills were partially offset by weaker conditions in Europe, which was impacted by the COVID-19 beginning in mid-March. Our gross profit margin was strong at 45.7%, an improvement of 320 basis points year over year. This was largely due to sales mix and decreased material costs. Our growth margin, coupled with the relatively flat operating expenses, helped generate operating income of $49.4 million, up 64.4% year-over-year, and strong earnings of 83 cents per diluted share, up 66% year-over-year. Brian will provide additional details on our Q1 performance shortly. But now let me turn to discussion of the COVID-19. Our hearts go out to all of those who have been impacted by the coronavirus pandemic. I would like to sincerely thank all of the first responders for their selflessness and courageous efforts to help those in need, as well as extend my gratitude to our over 3,300 employees for their cooperation and commitment to help ensure Simpson remains a safe workplace. The health and safety and well-being of our employees, their families, our customers, and our communities is our top priority and is at the forefront of every decision we make. We took immediate action at the onset of this crisis to enact rigorous safety protocols in all of our facilities by improving sanitation measures, implementing mandatory social distancing, reducing on-site staff through staggered shifts and schedules and remote working where possible, and restricting visitor access to our locations. As of today, all of our U.S. manufacturing facilities remain operational in accordance with the applicable shelter in place orders as suppliers of businesses deemed essential, including hardware stores and other building material companies. However, two of our larger European operations in the United Kingdom and France were ordered to cease nearly all operations in late March, forcing us to temporarily furlough many of those affected employees. We have every intention of being able to bring those employees back to work when the timing is right. Over the years, we've built a strong brand reputation with a loyal customer base and talented group of employees, and we have every intention of protecting that to ensure we can continue to service our customers while operating in accordance with local government regulations. Importantly, we have not experienced any supply chain disruptions related to the COVID-19 and have been able to meet our customer needs. In the month of April, sales declined compared to March levels due to lower demand from the anticipated slowdown in housing starts and general construction activities. While this situation is highly unique and unlike any other downturn we've experienced in the past, we believe we are well positioned to emerge on the other side from a position of strength. If you look back to 2008 and 2009 during the financial crisis, which was accompanied by a drastic decline in U.S. housing starts and a simultaneous 28% drop in sales, You'll see that our strong balance sheet played a major role in supporting our business through this recovery period. Today, our balance sheet provides us with ample liquidity to support our day-to-day operations. We ended the quarter with $305.8 million in cash on hand after drawing down $160 million on our revolving credit facility as a precautionary measure to preserve financial flexibility and ensure our working capital needs will be met in light of the current uncertainty stemming from the COVID-19 pandemic. Importantly, following the 2009 crisis, we made significant strategic changes to our business to ensure our foundation would be even stronger in the event of a future recession. These actions included diversifying our business to be less reliant on U.S. housing stores, by making key investments in adjacent products and markets. More recently, we've taken significant steps to rationalize our cost structure over the past three years in connection with our 2020 plan goals. We've been able to operate more efficiently as evidenced by our 250 basis point improvement in our total operating expenses as a percent of sales for the first quarter of 2020 compared to the first quarter of 2019. Given the level of uncertainty regarding the long-term impacts of COVID-19, including market conditions and demand trends, we have proactively taken additional measures to ensure we maintain our strong financial position. Beginning in the second quarter, we've implemented a hiring freeze and will focus on employees' retention and adjusted employee hours based on lower production levels in the near term. In addition, our discretionary expenses, including employee travel and spend on certain consultant-related projects, have been significantly reduced as we abide by the shelter-in-place orders throughout our operation. Turning to capital allocation, our strategy has shifted in the recent months to focus more on cash preservation until this crisis passes. As a result, we are reducing our planned capital expenditures will be used only for projects that are required for repair or maintenance or to address potential safety issues in our factories. In addition, we are being highly selective in regard to inventory purchases in the current environment in line with our goal to improve our inventory balance through careful management and purchasing practices. That said, you'll notice inventory dollars on our balance sheet at March 31st Thank you. Thank you. In regard to stockholder return activities, year-to-date as of April 25th, we paid over $20 million in dividends to our shareholders, and we purchased more than 900,000 shares of our common stock at an average price of $69.46 per share for a total of $62.7 million. However, given cash conservation is our priority in this current environment, We are suspending our share repurchase program until further notice. Finally, before I conclude, I'd like to highlight that we completed the final phase of the SAP implementation in our major U.S. sales organization during the first quarter of 2020 with a successful onboarding of our Stockton manufacturing facility. We now have all of our U.S.-based sales organizations transitioned over to SAP. As of today, we still anticipate a company-wide completion goal near the end of 2021. However, we will continue to monitor and update our timeline should stay-at-home orders remain in place for a prolonged period of time. In summary, we are pleased that we have delivered strong first quarter results. Since the COVID-19 pandemic began towards the end of the first quarter, we've begun to operate in a highly difficult and unpredictable environment. that has shaken our global economy. As announced in our earnings press release issued this afternoon, due to the significant level of uncertainty regarding future market conditions surrounding COVID-19, we've chosen to withdraw our previously issued annual 2020 outlook, as well as our financial targets from our 2020 plan at this time. In terms of our 2020 plan, While the operating environment has made it difficult to predict whether these financial targets remain achievable by the end of the fiscal 2020, we continue to execute based on the same underlying principles of focusing on operating efficiencies and cost savings to guide us through this pandemic as we move forward. In a world filled with so much uncertainty, I can say that we believe our business is very well positioned to weather the current storm as a result of our focus on elements that we can control, including upholding a best-in-class customer experience and manufacturing high-quality trusted products, maintaining overall financial flexibility by ensuring we have ample liquidity, and remaining conservative in our capital allocation approach with a focus on cash preservation in the near term. I'd like to again thank all of our employees for their passion and commitment to their health and safety and our excellent customer service. And I'd now like to turn the call over to Brian, who will discuss our first quarter financials in detail. Brian?